2023 (4) TMI 1282 - AT - Income Tax

Tribunal Confirms Rs. 14 Lakh as Unexplained Cash Credits Due to Lack of Documentation, Dismisses Appeal.

Valley Iron & Steel Co. Ltd. Versus ACIT, Central Circle, New Delhi

The Appellate Tribunal upheld the addition of Rs. 14,00,000 under Section 68 of the Income-Tax Act, 1961, as unexplained cash credits. The assessee failed ... Addition u/s 68 - identity of the creditor, the genuineness of the loan transaction and the creditworthiness of the creditor by furnishing documentary evidences not proved - HELD THAT:- Undisputedly, the assessee has failed to furnish PAN details, address proof, loan confirmation, ITR copy of the lender. It is also a fact that the name of the concerned lender has been struck off in the records of ROC. Therefore, there is serious doubt regarding the existence of the lender company. The assessee has also failed to prove the creditworthiness of the lender coupled with genuineness of the transaction. That being the case, the unsecured loan availed of Rs. 14,00,000 remains unexplained. Therefore, the addition made under Section 68 of the Act, in my view, is justified. As regards, the alternative contention of the assessee that nonrepayment of loan will amount to cessation of liability, find the said submission preposterous. Once, there is serious doubt regarding the genuineness of the loan transaction and creditworthiness of the creditor, it is not understood how it can be treated as cessation of liability when the liability itself is non-genuine. Assessee appeal dismissed. Issues involved:The dispute in the present appeal is confined to the addition made of Rs. 14,00,000 under Section 68 of the Income-Tax Act, 1961.Identity of the Creditor, Genuineness of the Loan Transaction, and Creditworthiness of the Lender:The Assessing Officer noticed that the assessee credited a loan of Rs. 14,00,000 from M/s. Gee Wire Pvt. Ltd. The assessee failed to prove the identity of the creditor, the genuineness of the loan transaction, and the creditworthiness of the lender by furnishing necessary documentary evidences. Despite the assessee's explanation that the loan was taken to procure fixed assets/capital goods, the Assessing Officer found the reply unconvincing due to the absence of supporting documents. The name of the lender was struck off by the Registrar of Companies (ROC) and no returns were available on the Ministry of Corporate Affairs (MCA) site. Consequently, the unsecured loan amount was added as unexplained cash credits under Section 68 of the Act. The contention that non-repayment of the loan would lead to cessation of liability was rejected, as doubts persisted regarding the genuineness of the transaction and the creditworthiness of the creditor.Decision:The Appellate Tribunal upheld the addition under Section 68 of the Act, as the assessee failed to sufficiently discharge its obligation to establish the identity of the creditor, the genuineness of the loan transaction, and the creditworthiness of the lender. The absence of PAN details, address proof, loan confirmation, and ITR copy of the lender, coupled with the removal of the lender's name from ROC records, raised doubts about the existence of the lender company. The Tribunal deemed the unsecured loan as unexplained due to the lack of evidence. The alternative argument regarding cessation of liability was deemed untenable, given the doubts surrounding the transaction's legitimacy and the lender's creditworthiness. Consequently, the appeal was dismissed, and the decision of the departmental authorities was upheld.